EDITORIAL: Oil companies have motorists over a barrel

Whether it’s an unseasonably mild winter, a changing stance on trade policy anywhere around the globe, or an explosion on the other side of the country – one thing is for certain. Gas prices are going to increase.

Industry officials are warning that a large explosion and fire at an oil refinery in New Brunswick could lead to higher gas prices in British Columbia. A massive blast at the Irving Refinery shook Saint John on Monday. The cause of the explosion is believed to be a malfunction in the refinery’s diesel treating unit.

But no matter the cause, the consequences are far more clear than the thick smoke that blanketed the New Brunswick city.

“A fire that caused undisclosed damage to the Irving refinery in Saint John, New Brunswick, Canada’s largest, has not yet been fully quantified by markets and comes in a period of lower demand and stronger inventories generally in the U.S. northeast,” said Dan McTeague, a senior petroleum analyst at GasBuddy. McTeague says the refinery fire comes at a time of lower demand and stronger inventories generally in the U.S. northeast.

“Nevertheless, a more thorough disclosure of damage to the refinery could yield concerns for supply and raise market prices should the plant’s 330,000 barrel a day output be curtailed for an extended period of time,” said McTeague. “Combined with a weaker Loonie due to the effects of pipeline constraints, motorists should look to higher pump prices generally in the weeks ahead.”

Drivers here on the Island have been repeatedly told that our gas is primarily supplied by the refinery in Cherry Point, Wash. – and we should pay little attention to issues on the other side of the country. But, of course, that’s only when those issues would lead to prices decline.

Don’t believe it? Consider this: The price of oil is currently about $74 a barrel, while the price at the pump sits at $1.39 a litre here in Greater Victoria. At its peak, oil prices reached $147 a barrel in late 2008. Gas prices at the time were $1.53.6 in the Capital Region, although oil prices alone would suggest the price should be closer to $2.75 a litre.

One of these days, someone in Ottawa is going to invest in a calculator and get to the bottom of this.